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Executive compensation

Executive compensation PurposeThe purpose of this paper is to examine how executive pay schemes influence managerial efficiency, which the authors measure as the risk-adjusted firm performance.Design/methodology/approachThe authors utilized hierarchical regression to test the hypotheses.FindingsThe authors find that as options constitute a higher percentage of total compensation packages, subsequent firm risk-adjusted performance declines. The authors also find an inverse relationship between TMT stock ownership and risk-adjusted performance.Research limitations/implicationsThe findings suggest that the firm stakeholders should reconsider the likely influence of option-based incentives and equity holdings on the risk-adjusted performance.Originality/valueMost executive compensation research focuses on either the pay-to-performance or pay-to-risk links. However, in this paper, the authors combine both the performance and risk dimensions simultaneously. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Strategy and Management Emerald Publishing

Executive compensation

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1755-425X
DOI
10.1108/JSMA-02-2016-0015
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to examine how executive pay schemes influence managerial efficiency, which the authors measure as the risk-adjusted firm performance.Design/methodology/approachThe authors utilized hierarchical regression to test the hypotheses.FindingsThe authors find that as options constitute a higher percentage of total compensation packages, subsequent firm risk-adjusted performance declines. The authors also find an inverse relationship between TMT stock ownership and risk-adjusted performance.Research limitations/implicationsThe findings suggest that the firm stakeholders should reconsider the likely influence of option-based incentives and equity holdings on the risk-adjusted performance.Originality/valueMost executive compensation research focuses on either the pay-to-performance or pay-to-risk links. However, in this paper, the authors combine both the performance and risk dimensions simultaneously.

Journal

Journal of Strategy and Management – Emerald Publishing

Published: May 15, 2017

References

  • Managerial incentives and corporate investment and financing decisions
  • Role of managerial incentives and discretion in hedge fund performance
  • The effects of managerial ownership on international and business diversification: balancing incentives and risks
  • Risk reduction as a managerial motive for conglomerate mergers
  • Founding family ownership and the agency cost of debt
  • Executive compensation and earnings persistence
  • Statistical arbitrage in the US equities market